Administrative costs drive up health care spending

Single-payer system would save millions locally, advocates say.

Gettysburg resident Mary Becky Lingle, 92, talks to Dr. Dwight Michael about her health as he checks her thyroid during her regular checkup visit earlier this month. (THE EVENING SUN -- CLARE BECKER)

The borough of Gettysburg recently received some bad news - its employee health care costs are skyrocketing. A report compiled by the Pennsylvania Economy League in October found that health care costs for borough employees will rise by 10 percent annually for the foreseeable future, leaving the municipality $1,169,031 in debt by 2016.

Then the borough received even worse news - there isn't anything it can do to stop it.

The borough and local governments throughout the country are in such dire straits, said Dr. Dwight Michael, because they have little control over the main driver of rising costs - excessive administrative costs. Michael is a physician, co-owner of Gettysburg Family Practice, and a member of Health Care 4 All PA, an organization advocating for a single-payer health care system in Pennsylvania.

According to Physicians for a National Health Program, administrative health care jobs have grown by 2,800 percent since 1970, while the number of physicians has only grown by about 100 percent. An increasingly complex and profit-driven health care model has added many expensive - and as Michael sees it - unnecessary, players to the system.

"There is a huge amount of waste in the health-care system," Michael said. "The average person looks at it and thinks that all their money is going to doctors and nurses, but they rarely think about profit margins, CEOs, medical supplies, and administrators.

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In 2011, Aetna, one of the nation's largest for-profit health care providers, earned $1.767 billion, dishing out a 25 percent increase in earnings per share to its stockholders. And Aetna is not an outlier. In 2011 Aetna, Coventry Health Care, Humana, and UnitedHealth Group all reported double-digit percentage growth in net earnings compared with 2010, according to an American Medical News and Securities and Exchange Commission report.

The Congressional Budget Office estimated that from 1995 to 2005, spending on administrative services grew by 7 percent annually. Pennacchio and the Health Care 4 All PA members believe that if the U.S were to switch to a single-payer system, administrative costs would dramatically decrease, mostly because a single-payer system is simpler.

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Chuck Pennacchio, executive director of Health Care 4 All PA, addresses those assembled at Valentine Hall at the Gettysburg Lutheran Theological Seminary during a 2008 discussion about single-payer health care. Pennacchio says that if the U.S were to switch to a single-payer system, administrative insurance costs would decrease dramatically. (THE EVENING SUN -- FILE)

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"When you have single payer, you get paid the same amount for every patient you see," Michael said, explaining that he would no longer have to spend a lot of time and money dealing with insurance companies, Medicare and Medicaid just to make sure that he gets paid.

As the U.S health care system currently stands, even under the Affordable Care Act, this complex collection system still exists, diverting doctors' attention away from actual health care or forcing them to hire medical billing professionals.

"I see nurses stop practicing medicine just to work as high-paid collection officers making sure the hospital gets all of its money from the insurance company," said Janet Landon, a Gettysburg nurse who worked at an insurance company for seven years.

Health Care 4 All PA estimates a single-payer system in Pennsylvania would save the Borough of Gettysburg $546,013 and the Gettysburg Area School District $2,187,900 annually. Currently, the borough spends $964,186 and the district $10,648,474 on employee health benefits.

In deriving these numbers, Health Care 4 All PA compared the $8,233 per capita that the United States spends on health care with France's $3,974 per capita spending. According to the World Health Organization, France manages to spend about half as much on health care than does the United States but ranks first worldwide in quality of care. Assuming a model similar to the French model of single-payer with both private and public doctors, the Health Care 4 All PA study found this potential for massive savings in local governments throughout Adams County.